FONTERRA'S board made the unanimous decision to close one of its three dairy factories in south-west Victoria on Monday morning, citing 'age' as the main reason for stopping operations.

Managing director Simon Bromell said the 100-year-old Cororooke factory was too old now to return it to its former glory.

"We are not going to reveal how much it would have cost to restore, but we did look at alternatives," he said.

"I want to reiterate this decision was based on the age and condition of the factory, not its performance or the people that worked there."

He admitted the decision was an extremely tough one to make, because it immediately placed 130 jobs up in the air.

"I travelled down to the factory as soon as possible to reassure the employees we would support them through this," he said.

"We will relocate some jobs to other factories in the region, including Dennington and Cobden, but that won't be possible with all of the positions."

He said the company's main focus now was on the helping the employees who are now facing unemployment.

"We are also working with the Victorian Government to ensure everyone at Cororooke has the opportunity to retrain or build on their current skills through government training programs," he said.

The factory, which is the company's smallest in the region, produces soft cheese and cream products.

Mr Bromell said he was not yet in position to reveal what would happen to the products made at Cororooke.

Production will be closed down in phases over the next 12 months, while the company plans to engage with the community on potential future uses for the site.

At the same time Cororooke employees were dealt the sad news, Fonterra also announced $20 million will be invested into their factories at Cobden and Dennington.

This included the acquisition of a disused National Foods factory next to the company's Cobden site.

He reassured Fonterra's farmers they will not be affected, with milk transferred to other sites, and that the company were committed to the long-term viability of the industry.

"We are deeply committed to manufacturing in south-west Victoria and have made no secret of our goal to grow milk supply by 100 million litres nationally," he said.

The company will continue to operate nine manufacturing sites in Australia, handling 1.8 billion litres annually.

United Dairy Farmers of Victoria (UDV) president Kerry Callow said the loss of 130 from Cororooke was extremely sad, but Fonterra's $20m investment into its south-west operations was positive.

"As dairyfarmers, we need our manufacturers to be efficient and that's what this is all about," she said. "If they are inefficient, then it is going to impact on our prices."

She said the retraction of Fonterra's dairy manufacturing jobs, added to Murray Goulburn's job cuts earlier in the year.

"This is not unique to dairy, it's happening right across the board," she said. "In the long-term, decisions like this one are going to help keep the Victorian dairy industry strong and viable."

Mayor blasts decision

COLAC Otway Shire Mayor Stephen Hart has labelled the closure of the Cororooke plant, a "tragedy" for the region.

As news began to digest in the tiny township of Cororooke and the district, the shire pledged to do everything it could to help the transition for the 130 workers who could lose their jobs in the restructure of Fonterra's Western District dairy production.

The Cororooke factory was closed for two days this week to give workers a chance to recover from the news.

Cr Hart said the shire aimed to play a vital role in assistance for re-employment for the workers, including facilitating retraining and possibly redeployment to other factories that were expanding in the region.

"I'm quite concerned that this will have a significant effect on the small community of Cororooke and surrounds," he said.

Colac Otway Shire Council has already met Fonterra representatives and will work with the State Government to look at support structures for future redundancies.

Acting chief executive officer Jack Green said council was immensely disappointed about the closure.

"We will work with employment agencies and other businesses which may be in a position to help Fonterra employees transition to jobs at other companies if that is required," he said.

The Fonterra factory was part of the fabric of Cororooke and had played a significant role in south-west Victoria's dairy industry during the past century, he said.

"This is a sad day for Colac Otway Shire, and in particular for those people who work at the plant," he said.

It was important for the community to understand Fonterra's decision was based on a planned rationalisation of its three factories in the region, and did not necessarily reflect the overall health of the local manufacturing sector, he said.

"All indicators suggest businesses in Colac Otway Shire are doing well. We are confident that our local manufacturing companies will be in a strong enough position to provide job opportunities to some of the people who may lose their jobs at Fonterra, if they cannot be relocated to other Fonterra sites at Cobden or Warrnambool," Mr Green said.

National Union of Workers Victorian president Tim Kennedy said the decision had come as a surprise in the industry.

"It's always been a really good plant, this has completely blindsided us," he said.

"The real tragedy is this is yet another regional community losing jobs.

"It comes on the back of job losses in the dairy industry that have been trickling all year – we need to find a way to turn it around."

Dairyfarmer sees closure as sad day

WARRION dairy farmer Doug Chant said it would be a sad day for the industry when the dairy processing plant was closed.

It is expected operations at the Cororooke factory will be phased out over 12 months, after 100 years turning milk into cheese and butter in the volcanic heart of the Western District known as Crater and Lakes country.

The region is famous for its dairy produce, sprung from the high rainfall country and rolling hills covered in green grass.

But milk tankers will now be diverted from the farms at Warrion, Cororooke and Coragulac to Cobden and Dennington.

Mr Chant said the founders of the Cororooke factory, Colac Dairying Company, had once been leaders in the industry and the region took great pride in its innovation in an era when farming communities were the backbone of Australia.

“Sadly this decision marks a time when farmers are being driven to almost a welfare status – everyone else controls the price and we're forced to accept it," he said.

“Small communities are not as financially set up as they once were.

“We rely on cities for funding to help keep rural towns like Cororooke going, and that will only increase once Fonterra shuts up shop.”

But Mr Chant said he understood the company's perspective.

“They're driving towards greater efficiency,” he said.

“I understand that. Let's just hope those efficiencies are reflected in what's paid back to the farmer at the farmgate.”